ACCOUNTING 104 (Government Accounting)

Government Accounting - encompasses the process of analyzing, recording, classifying,

summarizing, and communicating all transactions involving the receipt and disposition of
government funds and properties and interpreting the result thereof.

Main Objectives of Government Accounting?

 To record financial transactions of revenues and expenditures related to the

government organisations.
 To avoid the excess expenditures beyond the limit of the budget approved by the
government.
 To make expenditures according to the appropriate act, rules and legal provisions of the
government.
 To provide reliable financial data and information about the operation of public fund.
 To prevent misappropriation of government properties by maintaining the systematic
records of cash and store items.
 To facilitate for making auditing of the books of account.
 To help for preparing financial statements and reports
 To facilitate for estimating the annual budget by providing historical financial data of
government revenues and expenditures.

Three Stages of Government Accounting

Collection Stage of Accounting

The collection stage of accounting occurs during the early stage of the accounting cycle. The
first activity of the accounting process is collecting data. The ultimate goal of the accounting
cycle is to prepare financial reports that show the financial status of a business. To get to that
result, data regarding sales, purchases and other financial transactions during the accounting
period have to be gathered. These items are sorted according to the type of account they are,
and stored so they can be loaded into the accounting system and recorded at a later date. For
example, daily sales totals, office supply purchases made with cash and equipment purchased
with a company credit card are transactions that need to be recorded into the accounting
system, so they will be stored as sales, purchases and accounts payable, respectively.

Processing Stage of Accounting

The processing stage of the financial accounting cycle is the stage when things are recorded in
the accounting system. General journal entries for business transactions are entered, and then
those amounts are transferred to the general ledger. So, if a business had cash sales of $350,
the journal entry would include a debit to Cash and a credit to Sales, with general ledger entries
to update each account. If the business paid off a vendor account, the general journal entry
would include a debit to the accounts payable vendor account and a credit to cash, and those
ledger accounts would also be updated. Once all the accounting transactions have been
recorded into the general journal and general ledger accounts, the ledgers are totaled and the
unadjusted trial balance is created.

Reporting Stage of Accounting

Financial reporting starts the end of the accounting cycle. It is during this stage that the
financial reports a business uses the most – the Income Statement, Balance Sheet and
Statement of Owner's Equity – are completed. All required general journal entries have been
completed, and the general ledger accounts have been tallied, adjusted and closed out. These
numbers are then placed on their respective financial statements. The Income Statement
reports the total income and expenses of the business for the designated accounting period. It
also shows whether the business showed a profit or a loss. The Balance Sheet is a snapshot of
the business's other account activity and an inventory of assets. The Statement of Owner's
Equity shows how much the business owners have tied up in the business and a valuation of the
business at that particular time period. These statements are done monthly, but quarterly and
annual statements are also computed.

Importance of Government Accounting

To carry out the financial business of government in a timely, efficient and reliable manner (e.g.
to make payments, settle liabilities, collect sums due, buy and sell assets, etc.) subject to
necessary financial controls.

How Does Government Accounting Work

Government accountants are employed at all levels of government - federal, state and local. At
the federal level, Government Accountants manage public funds, investigate white-collar
crimes, perform financial statement audits for government agencies and conduct research on
emerging accounting issues. At the state and local levels, Government Accountants manage use
of local revenues, investigate frauds, perform financial, performance and compliance audits and
recommend corrective action where needed.

Responsibility, Accountability, and Liability over Government Funds and Property

a. Responsibility

1. It is the declared policy of the State that all resources of the government shall be managed,
expended or utilized in accordance with laws and regulations, and safeguarded against loss or
wastage through illegal or improper disposition, with a view to ensuring efficiency, economy
and effectiveness in the operations of government. The responsibility to take care that such
policy is faithfully adhered to rests directly with the chief or head of the government agency
concerned. (Sec. 2, P.D. No. 1445)

2. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority
over the financial affairs, transactions, and operations of the government agency. (Sec. 4(4),
P.D. No. 1445)

3. The head of any agency of the government is immediately and primarily responsible for all
government funds and property pertaining to his agency. Persons entrusted with the
possession or custody of the funds or property under the agency head shall be immediately
responsible to him, without prejudice to the liability of either party to the government. (Sec.
102, P.D. No. 1445)

b. Accountability

1. Every officer of any government agency whose duties permit or require the possession or
custody of government funds or property shall be accountable therefor and for the safekeeping
thereof in conformity with law. Every AO shall be properly bonded in accordance with law. (Sec.
101, P.D. No. 1445;Section 50, Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)

2. Transfer of government funds from one officer to another shall, except as allowed by law or
regulation, be made only upon prior direction or authorization of the Commission or its
representative. (Sec. 75, P.D. No. 1445)

3. When government funds or property are transferred from one AO to another, or from an
outgoing officer to his successor, it shall be done upon properly itemized invoice and receipt
which shall invariably support the clearance to be issued to the relieved or outgoing officer,
subject to regulations of the Commission. (Sec. 77, P.D. No. 1445)

4. When government funds or property are transferred from one AO to another, or from an
outgoing officer to his successor, it shall be done upon properly itemized invoice and receipt
which shall invariably support the clearance to be issued to the relieved or outgoing officer,
subject to regulations of the Commission. (Sec. 77, P.D. No. 1445)

c. Liability

1. Expenditures of government funds or uses of government property in violation of law or

regulations shall be a personal liability of the official or employee found to be directly
responsible therefor. (Sec. 103, P.D. No. 1445)
2. Every officer accountable for government funds shall be liable for all losses resulting from the
unlawful deposit, use, or application thereof and for all losses attributable to negligence in the
keeping of the funds. (Sec. 105(2), P.D. No. 1445)

3. No AO shall be relieved from liability by reason of his having acted under the direction of a
superior officer in paying out, applying, or disposing of the funds or property with which he is
chargeable, unless prior to that act, he notified the superior officer in writing of the illegality of
the payment, application, or disposition. The officer directing any illegal payment or disposition
of the funds or property shall be primarily liable for the loss, while the AO who fails to serve the
required notice shall be secondarily liable. (Sec. 106, P.D. No. 1445)

4. When a loss of government funds or property occurs while they are in transit or the loss is
caused by fire, theft, or other casualty or force majeure, the officer accountable therefor or
having custody thereof shall immediately notify the Commission or the auditor concerned and,
within 30 days or such longer period as the Commission or auditor may in the particular case
allow, shall present his application for relief, with the available supporting evidence. Whenever
warranted by the evidence, credit for the loss shall be allowed. An officer who fails to comply
with this requirement shall not be relieved of liability or allowed credit for any loss in the
settlement of his accounts. (Sec. 73, P.D. No. 1445)

Characteristics of Government Agencies:

-Their objective is to provide goods and services to various recipients or to develop or

implement policy on behalf of governments and not to make a profit;

-There’s an absence of defined ownership interest that can be sold, transferred or redeemed;-
They have a wide group of stakeholders to consider (including the public at large);

-Their revenues are generally derived from taxes or other similar contributions obtained
through exercise of coercive powers; and

-Their capital assets are typically acquired and held to deliver services without the intention of
earning a return on them.

Objectives of Government Accounting:

-To produce information concerning past operations and present conditions;-To provide a basis
for guidance for future operations;

-To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and-
To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.

Subjects of Government Accounting:

1. National Government- consisting of departments, bureaus, commissions, boards, state

collegesand universities.

2. Local Government – provinces, charted cities, municipalities, and barangays.

3. Government-owned or government controlled corporations – which were created by law to

manage specific type of business.

Philippine Public Sector Accounting Standards (PPSASs) provides the quality accounting
standards thereby enhancing the quality and uniformity in financial reporting by Philippine
Public Sector entities, and ensuring accountability, transparency, and comparability of financial
information with other public sector entities around the world.

Government Accounting Manual (GAM) presents the basic accounting policies and and
principles in accordance to Philippine Public Sector Accounting Standards (PPSASs) adopted
thru COA Resolution No. 2014-003 dated January 24, 2014 and other pertinent laws, rules and
regulations. It includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No.
2013-002 dated January 30, 2013, as amended; the accounting procedures, books, registries,
records, forms, reports, and financial statements; and illustrative accounting entries. It shall be
used by all National Government Agencies (NGAs) in the:
a. preparation of the general purpose financial statements in accordance with the PPSAS and
other financial reports as may be required by laws, rules and regulations; and
b. reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.
Objective of the Manual. The Manual aims to update the following:
a. standards, policies, guidelines and procedures in accounting for government funds and
property;
b. coding structure and accounts; and
c. accounting books, registries, records, forms, reports and financial statements.

Commission on Audit (COA) is mandated to promulgate accounting and auditing rules and
regulations and prescribed Government Accounting Manual (GAM) for National Government
Agencies (NGAs).

Department of Budget and Management shall be responsible for the formulation and
implementation of the National Budget with the goal of attaining our national socio-economic
plans and objectives.
Bureau of Treasury (BTr) plays a pivotal role in the cash operations of the national government,
the accounting rules and regulations pertaining to cash operations, collections, remittances and
disbursements, including public borrowings.

Objective of General Purpose Financial Statement (GPFS)

The objectives of general purpose financial statements (GPFSs) are to provide information
about the financial position, financial performance, and cash flows of an entity that is useful to
a wide range of users in making and evaluating decisions about the allocation of resources.
Specifically,the objectives of general purpose financial reporting in the public sector are to
provide information useful for decision-making, and to demonstrate the accountability of the
entity for the resources entrusted to it.

Responsibility for Financial Statements. The responsibility for the preparation of the FSs rests
with the following:

a. for individual entity/department FSs - the head of the entity/department central office (COf)
or regional office (RO) or operating unit (OU) or his/her authorized representative jointly with
the head of the finance/accounting unit; and

b. for department/entity FSs as a single entity - the head of the entity/department COf jointly
with the head of the finance unit.